The major goals of macro-economic policy are: to
achieve full employment in other words maintain a low and stable level of
unemployment. To maintain a relative stable level of price payment position at
a fixed stable exchange rate of growth.

Practically, inflation which is a persistence
increase in general price level is one of the macro-economic problems facing
Nigeria today. According to Ewa Udu and Agu G.A it began in Nigeria during and
after the Nigeria civil war (that is from 1965-1970).Before the war, there was
noticeable increase in the price of so many commodities such as a bag of 50cups
of rice that cast #14.00 rises to #43.00 immediately after the civil war in
1970. Also there was an increase in the price of other goods and since 1979 the
rate of inflation in Nigeria has been increasing.

Again, the Nigeria civil war (that is
secessionist Biafra) was faced with hyperinflation. During that time everything
was scarce relative to demand. This is because there was excess supply of money
by the federal government in attempt to persecute the war with few available goods. More so inflation has
been a scarce of concern to the government and something that was to be abided
absolutely at any cost, because it is one of the worst imaginable social evil
in a society.

However, there have been observed period of
unemployment in Nigeria until 1930’s when the classical economist theory which
propound that the demand for labor will also be equal to the supply of the
labour at the prevailing money wage rate, as this theory collapsed, due to the
depression of the 1930’s government has lend to accept periods of unemployment
as inevitable. Since independence in 1960 and in mid of 1980’s unemployment
have been viewed as one of the most untreatable problem facing the Nigeria
economy up till today. It assumes alarming dimension with the emergence of
graduate unemployment. As a result of this, the government has made many
attempts at achieving full employment through their various policies.

Nigeria economy has undergone strains and
stresses in their balance of payment since the collapse of the oil boom in
early 1980’s. During that time, Nigeria export was mainly crude oil which grew
steadily from 1975 and reached a peak in 1980, the import grew faster, bringing
about a growth deficit in the visible trade balance. Also the production and consumption patterns that
emerged from, the era of the oil boom could not be sustained in the face of
declining export or foreign exchange and inflation resulted from the heavy
borrowing by the civilian administration, this made the balance of payment,
capital account balance to reduce to degree of deficit which leads to low
external reserve. Furthermore inflation is generally used to describe a
situation of rapid persistence and unacceptable increase in general price level
in any economy which brings about decrease in the value of currency.

Also Lerner (1949: pg 27) describe inflation as
an excess of demand over supply. Again Solow (1970) sees inflation as going on
when one needs more and more money to buy some representative bundle of goods
and services meaning that inflation is a part of the adjustment process between
two equilibrium. However it is not every rise in price that is being regarded
as inflation but a persistent rise in aggregate price of goods and services;
this is because price may be rise to support a higher level of aggregate
welfare.

The main reason for allowing inflation is
because it allows for substantial redistribution of income and wealth from
savers to borrowers that is from those who cannot protect themselves from the
rise in the price of what they buy by...

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